Building Financial Models Course

Financial modeling demands a logical, consistent approach. This workshop builds a financial analysis and a valuation model through a series of logical and practical stages.

Upon completion, delegates will have a comprehensive understanding of advanced modeling, as well as how each technique can practically be applied through: 

• Building a financial model from a blank sheet 
• Designing models which minimize errors 
• Writing models which can be maintained and augmented in the future
• Developing models with advanced techniques such as risk, sensitivity, and optimization and forecasting. 

Course Contents

DAY ONE

Financial Analysis and Valuation

• Different approaches to valuation 
• Financial analysis and valuation framework model
• Useful Excel methods, features and techniques 
• Common pitfalls and mistakes in Excel.

Alternative Model Review

• Model Structure and Planning
• Model design and structure – key stop
• Planning the equity valuation model 
• Required sheets, calculations and DAYs 
• Five essential auditing techniques. 

Completing and Checking the Financial Analysis/Valuation Template

• Adding Cash Flows and Ratios
• Structured model with a menu and accounting statements
• Calculating key financial ratios

DAY TWO

Adding Cash Flow and Ratios to Template

• Non-cash Flow Valuation
• Non-cash flow methods
• Accounting methods 
• Dividend discount models 
• Market-based methods – EPS and multiples 
• Peer groups 
• Calculating Accounting and Market Value on Template 

Forecasting and Equity Valuation 

• Forecasting Methods 
• Review of forecasting methods 
• Macro forecasting 
• Linear methods 
• Review of historical performance 
• Relationship between company and financial strategy 
• Identifying and forecasting key drivers 
• Linkages and modeling problems 
• Reviewing Performance and Adding a Forecast. 

DAY THREE

• The Case Template and Deriving Forecast
• Financial Statements. 
• Free Cash Flows 
• Derivation of free cash flow
• Checking model results and redefining forecast 
• Reasonableness of forecast and results. 
• Adding Free Cash Flow to the Model. 
• Cost of Capital:
• Alternative theories – bonds and arbitrage pricing theory 
• Capital Asset Pricing Model constituents 
• Discussion and agreement on WACC inputs
• Asset and equity betas and risk 
• Mathematical derivation 
• Deriving Beta from Data and Adding WACC to Case 
• Initial Equity Valuation: 
• Methods of adding terminal value 
• Producing an equity valuation 
• Comparison to existing share price 
• Adding Equity Valuation to the Template 
• Risk, Targeting and Other Layers
• Alternative Cash Flow Valuation 
• Time varying WACC
• Adjustments to value
• Adjusted Present Value (APV) method 
• Existence and addition of financial and operational synergies 
• Reconciliation to economic profit
• Adding APV to the Template
• Risk and Sensitivity 
• Understanding of risk and multiple answers
• Sensitivity and tables 
• Creating sensitivity graphs
• Scenario planning based on economic climate
• Alternative scenario methods 

DAY FOUR

• Testing the Models with Different Sensitivity
• and Risk Matrices 
• Optimum Structure and Targeting 
• Achieving a target valuation 
• Goal seeking method
• Testing valuation with leverage and structure 
• Targeting the Case to Improve Valuation Sensitivity 
• Management Reporting and Model Review:
• Management reporting and summary
• Suggestion for other improvements to the valuation model 
• Final audit 
• Help and user assistance
• Securing and protection 
• Documentation and maintenance.